The producer price index is considered a good predictor of future consumer prices because increases in input prices:
A. are used by consumers to make decisions on what to buy.
B. are accounted for in PPI, and therefore this automatically adjusts the CPI.
C. are observed first in the PPI, adjusting the CPI downward.
D. eventually make it to consumers when they buy the final product.
Answer: D
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A major weakness of the kinked demand curve model is that it does not explain how the equilibrium price, i.e., the price at the kink in the demand curve, is determined
Indicate whether the statement is true or false
Open market operations alter the money supply by ________
A) influencing banks' ability to make loans to individuals and corporations B) adding currency to or withdrawing currency from banks' vaults C) adding currency to or withdrawing currency from the checking accounts of individuals and corporations D) influencing banks' ability to make loans to the government E) none of the above